China's economy will experience only a moderate slowdown in 2008
because its diversified exports and strong domestic demand will
help it stay resilient amid a weakening world economy, economists
said yesterday.
"We expect the Chinese economy to grow by 10 percent this year
despite a US-led global economic slowdown," said Liang Hong, an
economist with Goldman Sachs in Hong Kong. "Strong domestic demand,
especially investment growth, is expected to sustain the overall
GDP growth, though the export growth is set to slow down."
China has an average GDP growth of 10.6 percent over the past
five years, thanks to its blistering export growth and strong
investment. Yet the worsening US subprime crisis is stoking
concerns that the world's fourth-largest economy may loose its
steam when American consumers tighten their purse strings against
Chinese goods.
China's GDP was never that "coupled" with US growth, Bank of
America economist Wang Tao said, because its exports have been
diversified in destination and products.
A Standard Charted Bank report says the US now accounts for only
about 16 percent of China's exports, compared to 25 percent in
2001. Booming emerging markets, including Latin America and Africa,
now buy about 37 percent of the steel, clothes and electronics it
exports.
Domestic manufacturers' rising competitiveness may help them
expand in the global market, thanks to enhanced technological
innovation and rising labor productivity. Machinery now comprises
more than half of China's exports, compared to less than one-third
in the early 1990s.
"The slowdown in economic growth will reduce overall imports by
the US but increase its demand for low-end and inexpensive goods,"
said Mei Xinyu, a researcher at the Chinese Academy of
International Trade and Economic Cooperation, a think tank
affiliated to the Ministry of Commerce.
In fact, China's exports to the US are likely to increase, he
said, citing the fact that they have increased steadily even though
the US economy began slowing from late 2000.
China's overall exports may slow down, but experts say strong
domestic demand will continue to play a more important role in
propelling the economy.
"Strong domestic demand appears to have become a good cushion
against slower external demand," said Gong Fangxiong, an economist
with Morgan Chase Bank, Hong Kong. "And in 2008, we look to another
year of solid economic growth at 10.5 percent.
"A significant external slowdown would reduce the need for more
aggressive tightening of China's macroeconomic policies, creating a
healthier environment that would foster the needed shift toward
more sustainable, domestically-driven growth."
Last year, China's central bank raised the interest rate six
times, and ordered local lenders to set aside more cash in deposit
on 10 occasions to curb inflation and prevent overheating.
The central government implemented a series of administrative
measures, too, to cool down the economy. These steps have proved
quite effective in reducing investment and production, with the GDP
growth starting to decline from a record 11.9 percent in the second
quarter of last year to 11.2 percent in the last.
"The government (however) could tolerate slightly faster
investment growth by relaxing its macro control slightly because of
the US downturn," Citigroup China economist Shen Minggao said.
Surging fiscal revenue will give the government great leeway to
increase public spending when necessary, analysts said. And soaring
corporate profits over the past years will give a strong incentive
to domestic enterprises to build new plants and research
facilities.
According to the National Statistics Bureau, the government's
fiscal revenue was 5 trillion yuan ($691 billion) last year,
compared to 1.89 trillion yuan ($261 billion) in 2002.
"The global downturn should help the Chinese economy to cool off
without the government having to take aggressive tightening
measures by resorting to blunt policy instruments," said Huang
Qing, of Morgan Stanley.
Besides, domestic consumption, which the government has tried to
boost, is expected to remain robust after the country's retail
sales growth hit an eight-year high last year.
"At the same time, domestic market-oriented sectors, especially
those exposed to capture spending supported by the government,
should do relatively well as the government raises its spending to
shore up domestic demand, offsetting external demand," Huang
said.
Rising consumer prices, however, will remain a big concern for
the government because food and oil prices, the main drivers of
inflation, are not expected to ease this year, analysts said.
Achievements of past five years
Stable and brisk growth. The annual GDP growth averaged 10.6
percent, with fluctuation of less than 1 percentage point.
Record number of jobs created. The country created 51 million
employment opportunities.
Rising economic benefits. The country's fiscal revenue climbed
to 5 trillion yuan ($691 billion) last year, compared with 1.89
trillion yuan ($261 billion) in 2002. Large-scale firms'
accumulated total profit over the past five years rose to 7.86
trillion yuan ($1.09 trillion). Last year alone it was
2.2-trillion-yuan ($304 billion).
Rapid income growth of urban and rural residents. The disposable
income of urban residents grew at an annual average of 9.8 percent
to reach 13,786 yuan ($1,900) last year. Rural residents' net
income rose, too, to 4,140 yuan ($572) in 2007, increasing 6.8
percent a year.
Notable progress in overall national strength. The total
installed electricity generating capacity increased 350 million kW,
and 28,000 km of highways were built.
(China Daily January 25, 2008)
